Question

COURSE TITLE:Business Research Methods and Statistical Analysis

TOPIC:Literature Review

Q1/Consider the topic of study is STUDY ON IMPACT OF PERFORMANCE APPRAISAL FEEDBACK ON JOB SATISFACTION AND ITS IMPACT ON ORGANISATION COMMITMENT and prepare the chapter two below points. It must fulfill all the headings of the chapter two

Chapter 2 – Review of Related Literature and Studies

2.1 Related Literature

2.2 Related studies

2.3 Syntheses

Note: Page range between 8 to 15 pages

Answer 1

Several researches have been done in various countries like Turkey, Pakistan, Netherlands, US, UK, Australia,
Portugal, Malaysia, Bangladesh, Singapore, etc. to show the
importance of performance appraisal system in the service
sector, including industries like banking, telecom, retail,
educational, non-profit semi government and government,
health, police, and other knowledge intensive industries.
The studies highlight that performance appraisal system has a major impact on the job satisfaction of the employee
because of which they feel more committed towards their
organization. Performance evaluation measures whether
financial or non-financial if perceived as fair and
transparent, results in the trust among the employees and
the management, which makes them, develop a feeling of
belongingness for their organization and in turn they
become loyal and faithful towards it.
Job Satisfaction of an employee can be caused by many
factors as proved by numerous studies conducted in Turkey,
Pakistan and U.S.A. According to Kaya et al (2010) in
Turkish Banks if HRM activities like accurate judgement of
behaviour and attitude during recruitment and selection,
making people to work as a team, following up of a suitable
written policy when mediated by improved organizational
climate like managerial competence and consistency in
activities, lesser workload pressure on employees,
maintenance of proper organizational boundaries, ethics
and cohesion among people then it leads to the feeling of
satisfaction among employees. Similarly Riaz et al (2010)
conducted a research on managerial and non managerial
employees of telecom sector in Pakistan and studied the
relationship between pay and benefits, performance
appraisal system, career development and management,
improved supervision, collegial work environment, and
communication system which is open and direct with the
job satisfaction levels. He found that proper supervision and collegial work environment, open communication system, and a transparent performance appraisal system with career development opportunities were positively correlated to job satisfaction. Further he also found that job satisfaction among employees’ results in commitment towards their job and the organization as a whole. Ahmed et al (2010) reported in Semi Government Organizations (SGO’s) of Pakistan that a better Performance appraisal system which aligned with the HRM policies increases job satisfactionand reduces the intentions of turnover among workers
which in turn enhances the organizational performance.
Hui-Chu et al, 2012 revealed that the quality of the system,
quality of information and quality of service positively
impacted the satisfaction levels of the accounting staff of
the SME’s while using accounting information system. In
U.S. Municipal corporations Ellickson (2002) highlighted
that environmental factors such as promotional
opportunities, satisfaction with the pay and benefits,
performance appraisal, equipment and resources, training,
employees’ perception of an evenly distributed workload
among co-workers, relationship with the supervisor and
departmental esprit de corps that is teamwork were
significantly and positively related to overall job
satisfaction. He also found that job satisfaction was not
much related to the demographic variables (i.e. age, gender
etc). Contrary to the above study Singh et al, 2012 in U.S.
found the relationship between age and job satisfaction. He
found that the older employees were more satisfied with
their jobs as compared to the younger workers. The author
suggested that the reason for this could have been that since
the younger workers are more impulsive and impatient and
expect more from their employers than the older workers
whose mortgages have paid off and their children have
grown up and so they remain less satisfied with their jobs
than the older workers.
The other dependent variable included in our study is the
psychological attachment of the employee with the
organisation i.e. organizational commitment. It can be due
to the comfort level with the current organization, cost and
fear associated with leaving of the organization and joining
the other and social disruption caused by making new
acquaintances in the new environment and leaving the old
ones. This particular component which is the need
component is known as continuance commitment. It may
also be due to the feeling that after joining the organisation
the employee is ought to be loyal and faithful to it. This
sense of obligation towards the organization is also termed
as the normative commitment. The attachment of the
employee can be due to some emotional reasons by which
the employees identify him with the goal of the
organization. This shows that the employee is affectively
committed towards the organization. There can be many
antecedents of organizational commitment as suggested by
Camelleri (2002) who after investigating a state owned IT
industry in Malta, Europe indicated that the employees with
lesser educational qualification, having a higher position in
the organizational hierarchy and with lesser ambiguity in

the role performed, with lower role conflict and positive
impact of overall state of roles played within an
organization are more committed to their organization. It
increases all the normative, continuance commitment and
affective components of the organizational commitment.
The researcher also found that the personality of the worker
is also related to the continuance commitment; however the
comparative analysis of the personality variable was not
done during the research. Similar study was conducted in
knowledge intensive industries (i.e. finance, IT,
manufacturing, and education firms) of Malaysia by Tan
(2008) where it was found that career development related
human resource management practices like performance
appraisal, compensation and comprehensive training effects
the POS (perceived organizational support) which results in
particular the internal promotion and supervisory support
and all these ultimately results in affective commitment.
Esteves et al (2010) when conducted a research in six
Portuguese banks highlighted that high performing HRM
practices which were training and development,
development oriented performance appraisal, information
sharing and reward practice including the performance
based incentives were positively correlated to affective
commitment.
A good performance appraisal system should have some
qualities like it should be regular, its procedure should be
transparent, standard and consistent, the results of the
appraisal should be shared among all the employees in order
to remove the misconceptions and most importantly that it
should be unbiased. The employees should perceive justice
when the management appraises their performance. It can
be of three types. When the justice is associated with
outcome and rewards then it is known as distributive
justice, when related to the fairness in the process of
performance appraisal then it is known as procedural
justice, and when linked to the treatment the employees
receive in terms of truthfulness, sensitivity, timeliness and
respect by the management towards their problems related
to the results of the performance appraisal it is known as
interactional justice. Many of the researches reveal the
importance of a fair and transparent performance appraisal
system to increase the job satisfaction level of the
employees. To prove the above mentioned statement
Pettijohn et al (2001) conducted a survey of sales personnel
in US retail industry and found that if an explicit and
transparent performance appraisal system is present in an
organization where the results of the process are discussed
openly then it would result in job satisfaction and
organizational commitment as it enhances the perceptions
of fairness among employees. Some other factors are also
known to increase job satisfaction, organizational
commitment and reduce the turnover intentions as indicated
by the study of Jawahar (2006), in not-for–profit service
organizations in Midwestern U.S. which revealed that
satisfaction with the performance feedback, ratees’
participation in the performance appraisal process, and the
satisfaction with the rater are positively related to job
satisfaction and continuance, affective and overall
organizational commitment while it is negatively related to
turnover intentions. Perception of fairness in performance
appraisal also plays a crucial role in enhancing the
employee satisfaction levels as shown by Swiercz et al
(2005), in U.S. among state public service agency
employees during his field study. He investigated the
effects of three types of employee perception of
performance appraisal fairness (i.e. procedural, distributive
and interactional). He found that perception of procedural
fairness of performance appraisal significantly predict
employee performance, organizational commitment,
supervisory satisfaction, job satisfaction and pay
satisfaction while distributive fairness effected the
employee performance and organizational commitment and
interactional fairness was positively related to supervisory
satisfaction and organizational commitment. It explains that
the employees remain more interested with the fairness in
procedures of the performance appraisal system than the
outcome of the appraisal. Similarly Gabris et al (2001) after
his research on U.S. county government employees
revealed that between three variables of employees
perception of performance appraisal i.e. instrument validity,
distributive justice and procedural justice and job
satisfaction there exists a moderate positive relationship. He
also showed that a modest negative relationship exists
between distributive and procedural justice and job burnout.
A study done by Lau et al (2008) in Australian health
service sector demonstrated that job satisfaction is affected
by the performance evaluation measures taken by two
evident processes one is outcome based through fairness of
outcome (distributive justice) and the other non-outcome
based through trust in superior and organizational
commitment. Also non-outcome based process was found
to be much stronger than outcome based process. Bernardin
(2002) in Florida, U.S. investigated manufacturing and
police agencies and revealed that lower levels of employee
productivity and job satisfaction are due to discrepancies
between self and supervisory performance appraisal which
in turn results in higher levels of turnover. These
discrepancies can be removed by the attribution training
given to both the supervisor and the subordinate to prevent
the actor observer bias. Li, 2012 in the Australian energy
sector found that CAPM (Capital Asset Pricing Model) is a
better method of performance evaluation to measure the
rate of return of an asset in a well diversified portfolio for
the listed (public) companies, however for both listed and
delisted (private) companies DCF (Discount Cash Flow) is
a better evaluation method. In Bangladesh Sogra et al
(2009), when investigated among executive MBA students
the association between employees’ perception of
performance appraisal politics (POPAP) and organizational
outcome, it was revealed that POPAP for punishment
motive reduces job satisfaction and organizational
commitment and increases turnover intentions while
POPAP with motivational motive increases job satisfaction
and organizational commitment while reduces their
turnover intentions. Studies indicate that the feedback given
to the employees about their performance in the
organization has a direct impact on the emotions of the
workers which was also shown by Belschak et al (2009), in
Netherland. He reported among students and working
adults that emotional reactions as a result of different types
of performance feedback (negative or positive) intervene
the association between performance feedback and
counterproductive behaviour, turnover intentions,
citizenship, and affective commitment. Other researcheshighlight the direct impact of the performance appraisal
system on the loyalty and belongingness of the employees
with their organization. In U.K police force Sholihin et al
(2010) illustrated that performance appraisal measures
whether financial or non-financial are associated positively
with organizational commitment. It was shown that if the
employees perceive fairness in the process of the appraisal
system they develop trust towards their organization which
in turn increases their commitment towards their job and
organization. Camilleri et al (2007) in Maltese public
officers in Netherlands demonstrated that the informal
performance measures are more suitable and the
employees’ positive perceptions about how well the
organization is managed results in greater organizational
commitment which in turn increases the public service
motivation.
Thus after going through the review of literature we can say
that if the performance appraisal system in an organization
is perceived as fair, transparent and unbiased it would
increase the job satisfaction level of the employees. It when
results in a positive feedback accompanied by perceived
organizational support (POS) leads to positive emotional
reactions which makes the employees affectively
commitment towards their organisation. The performance
appraisal can be outcome based resulting in distribution of
rewards and non-outcome based resulting in trust in the
supervisor and organizational commitment. If a discrepancy
between self and supervisors performance appraisal exists
then it would lead to lower job satisfaction which can be
further removed by the training given to the supervisor and
subordinates in this concern. And at last if employees feel
that the motive behind the performance appraisal politics is
for the motivational purpose then it increases the job
satisfaction and the employees feel more loyal and
committed towards their organizations.
However to the best of our knowledge no Indian study has
been conducted in the service sector as a whole to show the
impact of performance appraisal system on the job
satisfaction and organizational commitment of the
employees.
The research question is: “What is the impact of the performance appraisal system on
the job satisfaction and organizational commitment in the
service sector in India using primary data?”DISCUSSION
In the current study the impact of performance appraisal system on the job satisfaction and organisational
commitment of the employees in the service sector
industries has been found out. The employees who were
satisfied with the performance appraisal system of their
organisation were also found to be satisfied with their jobs
as is also indicated by the various studies done in the service
sector in other countries like Pakistan (Riaz et al, 2010 and
Ahmed et al, 2010) and USA (Ellickson, 2002). Our study
also shows that the employees who were satisfied with the
performance appraisal system of their organisation were
committed to their organisation as is also shown by
previous researches done in Malaysia (Tan, 2008) and
Portuguese (Esteves, 2010). As mentioned in the literature
a fair and transparent system of performance appraisal is
needed in every organisation to keep the employees
satisfied with their job and commitment to their
organisation which can be either affective commitment or
normative commitment (Pettijohn et al, 2001; Swiercz et al,
2005; Gabris et al, 2001; Bernardin, 2002; Jawahar, 2006 in
US; Lau et al, 2008 in Australia and Sogra et al, 2009 in
Bangladesh).
The employees who were married were found to be more
satisfied with their job and were more committed to their
organization than the unmarried employees. This may be
due to the reason that after marriage the responsibilities of
the employees increase, and they view their steady job as
more important and valuable to fulfill their multiple
demands, while many employees after marriage try to
adjust to the things they were earlier dissatisfied with
(Austrom et al, 1988; Federico et al, 1976; Garrison and
Muchinsky, 1977; Watson, 1981). The employees who
were satisfied with the jobs in turn were also found to be
committed to their organization (Moser, 1997) and so the
married employees and the employees who had more total
work experience and experience in the current job were also
found to be commitment to their organization. The
employees with higher work experience in the job tend to
be more satisfied with their job than the ones with lesser
work experience. This may probably be due to the reason
that the employees after spending a long time in the same
company environment become adjusted and used to it and
so feel more satisfied than the newer employees who face
difficulties in their adjustment to the new company
environment.
CONCLUSION
The study impresses on a body of work that stresses on the
importance of Human Resource functions as the key
contributors to the performance and growth of
organizations in the service sector industry. Effective HRM
practices includes performance appraisal that motivates the
employees and keeps them satisfied with their jobs and
committed towards their organisation. It is concluded from
the study that the employees who were satisfied with the
performance appraisal system of their organization were
also satisfied with their job and were committed to their
organization.
LIMITATIONS OF THE STUDY AND
RECOMMENDATIONS
The study had few limitations also like a larger sample size
could have been taken to make the results more generalized
and robust. Future studies should include more dependent
variables like career satisfaction, job stress etc. to find the
impact of performance appraisal system on them. Other
sectors could also be considered in future researches to
study the performance appraisal system. Thus every
organization should have a fair and transparent performance
appraisal system which is equal for every employee to make
them more satisfied with their job and committed to their
organization. This in turn will give them mental peace and
result in the growth of the organization and the country as a
whole.